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HMRC confirms that location-targeting services can be zero-rated

Melanie May | 9 September 2020 | News

In a Brief on VAT and digital advertising by charities, HMRC has confirmed that location-targeting services can be zero rated.
HMRC has previously ruled that most digital advertising should be subject to VAT, and had raised assessments to recover VAT from some advertising agencies. However, these costs were generally passed on to charities, amounting to millions of pounds of irrecoverable VAT.
The Charity Tax Group (CTG) has been engaging with HMRC on this point for approximately three years. In July this year, CTG received a letter from HMRC, confirming that VAT was no longer considered due on internet search browsing advertisements, except where they appear on personal social media accounts.
HMRC has now issued Revenue & Customs Brief 13 (2020): VAT charity digital advertising relief to confirm this. In addition, in the Brief HMRC also now accepts that ‘Location Targeting’ is within the zero rate.  Categories described as ‘social media’ and ‘subscription website’ advertising remain regarded by HMRC as standard rated for VAT purposes, but all other forms of digital advertising are zero-rated.
The inclusion of ‘Location Targeting’ in the zero rate followed further discussion between CTG and HMRC.  CTG has welcomed this new inclusion, which it says will not only save money, but simplifies the application of the policy.
CTG is continuing its work on the current law and its interpretation, to seek any further opportunities to change the legislation to better reflect the original intentions behind the relief.
CTG Vice Chairman, Richard Bray, commented:

“We are delighted that after further positive discussions we have had with HMRC, their view of the VAT status of digital advertising provided to charities has been clarified even further.  Not only have they accepted a wider ambit for the zero rate, but the classifications of services, based on their policy, will be much easier to apply than appeared the case before the Brief was issued.  It is great news for charities.”



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